US carriers cut frequencies, not destinations as they seek federal funding

As part of securing billions of dollars in financing from the federal government US airlines must continue operating flights to all domestic destinations currently served. As part of an Order to Show Cause issued on Tuesday the Department of Transportation announced that, while frequencies and route options may be reduced, the destinations served must remain at prior levels to ensure connectivity within the national airspace. In total the Department identified 592 points that qualify for such service obligations.

Airlines will not be permitted to coordinate their operations in maintaining this service. Over the weekend it was rumored that airlines might create an unprecedented inter-carrier codesharing operation to reduce capacity on overserved routes. The DOT filing clearly indicates, “These provisions do not authorize any coordination among air carriers that would violate the antitrust laws.” That would preclude the increased cooperation.

Reducing frequencies, not destinations

The ability to cut frequencies and route diversity is critical to the airlines as they slash capacity to contend with the new normal of minimal air traffic demand in the US market today. To that end, any destination served 5 or more days per week will be required to maintain service on at least five days. Destinations served less frequently can drop to a single weekly flight.

Moreover, a destination served from multiple other points in a carriers network need not maintain all those routes. Just one is necessary. Or the airline can choose to vary the routes, running from a spoke destination to different hubs throughout the week so long as the aggregate number of flights is five or more.

Airlines will have the option to aggregate flight frequencies in markets rather than individual airports. For larger metropolitan airports this will allow for consolidation of services. New York City (EWR/JFK/LGA/HPN); Miami (MIA/FLL); Washington, DC (IAD/DCA/BWI); Houston (HOU/IAH); Dallas (DFW/DAL); Los Angeles (LAX/LGB/SNA/BUR); and San Francisco (SFO/OAK/SJC) are among the metro areas considered a single market in this context.

There are also notable exceptions to the single market rule, with Everett, Washington not considered part of the Seattle market. Similarly, neither Melbourne nor Sanford, Florida are not seen as part of the Orlando market under the ruling, despite advertising themselves as options for Orlando.

The DOT stops short of suggesting that some of these markets should consolidate operations to fewer airports or terminals, though that could also be beneficial to all parties involved.

In some ways the requirement to continue service harkens back to the Civil Aeronautics Board (CAB) era and federal regulation on what routes must operate and what the fares would be. This move does not purport to set fares and leaves far more flexibility to airlines than the CAB once did, but the requirement to not reduce service on existing routes does read somewhat similarly to the CAB version. In both cases direct appeals to the government could permit such changes if the Department determines it acceptable.

Airlines that accept funding under the CARES act are required to maintain the service levels until 30 September 2020, in line with the similar staffing requirements to receive the funds. Regional carriers are also eligible for the funding but generally have no say in the routes they operate on behalf of mainline carriers. To address that the DOT allows that a “Service Obligation will be considered met if it is operating all flights designated by its mainline affiliate, consistent with the mainline carrier’s Service Obligation.” If a mainline carrier does not require operations from its regional it could sit fully idle and still be considered in compliance, so long as the mainline carrier is otherwise meeting its obligations.

A reasonable compromise?

The rules provide for airlines to dramatically reduce operations without abandoning any markets. They also require that the airlines continue to compete. Short of the DOT explicitly either shutting down commercial aviation or fully taking over the airlines’ route planning and revenue management tasks for some duration (neither of which is appealing for many reasons) this approach delivers a reasonable compromise.

Southwest Airlines intends to cut capacity by 40% in May, but did not indicate any destinations to be removed from its map. United Airlines, Delta Air Lines, American Airlines and JetBlue all plan major capacity cuts but, for now, are not removing any airports from their service. Other airlines are taking a different approach, however, that could present challenges. Spirit Airlines will halt operations in the New York City area, a move that would render it ineligible for the CARES act aid but in support of the CDC’s policies. Hawaiian Airlines slashed nearly all of its mainland routes as the Hawaiian government implemented a mandatory quarantine rule. How some of these issues are reconciled remains to be seen.

About Seth Miller

Seth Miller has over a decade of experience covering the airline industry. With a strong focus on passenger experience, Seth also has deep knowledge of inflight connectivity and loyalty programs. He is widely respected as an unbiased commentator on the aviation industry.

He is frequently consulted on innovations in passenger experience by airlines and technology providers.